A short sale is the sale of a home in which proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner can no longer make the mortgage payments.

Potential risks to keep in mind:

²Up to 3 months to receive a response on an offer

²Lower acceptance rate – approximately 10% or less

²Financing obstacles – potential interest rate changes

²The price can still change, even after the seller accepts

²High “opportunity” cost

Potential benefits to the Buyer:

²You might get a good deal – below market value

What is an REO (Real Estate Owned)/HUD–VA Foreclosure

Bank and Government Owned Properties

What it means:

REO is an acronym used by financial institutions, which means Real Estate Owned. It comes back into the bank’s portfolio via a foreclosure process. Most REO properties are sold AS-IS with the seller making no repairs. It is also addressed in their corporate addendums stating that the buyer will purchase AS-IS, but still have the right to contingencies of inspections.

Potential risks to keep in mind:

²Response time from the bank can take up to four weeks

²AS-IS condition – how handy are you?

²Often have a multiple offer situation

²Surprises that often take place after close

²Possible Title issues

Potential benefits to the Buyer:

²You might get a good deal, but at some cost or additional expense to you

The basic steps of foreclosure

WASHINGTON – Aug. 24, 2011 – In recent news, Fannie Mae has publicly assured homeowners going through foreclosure that they will be protected from losing their homes while applying for a federally funded loan modification. Homeowners can apply for a modification at any point before or during the foreclosure process.

If a modification is approved, homeowners can keep their homes if they make their adjusted payments. Absent that, here are the stages of a typical foreclosure:

1) In default: A loan is in default when a mortgage payment is 30 days late.

2) Warning: When a loan is 60 days past due, the bank, credit union or mortgage company warns that foreclosure is the next step.

3) Proceedings begin: After 90 days, the lender refers the loan to its foreclosure department, and hires a local lawyer to begin foreclosure proceedings.

4) Sale advertised: The lender's lawyer advertises the property for sale for four consecutive weeks in a local newspaper. The sheriff's sale date is listed in the advertisement.

5) Sale held: The sale is held on the published date. A sheriff's employee conducts a courthouse auction and the highest bidder wins, usually the bank that owned or serviced the mortgage.

6) Sheriff's deed: The winning bidder gets a sheriff's deed that lists the last date the homeowner can redeem, or take back, the property, usually six months from the date of the sheriff's sale. During this redemption period, the homeowner can live in the property or try to sell it.

7) Redemption period: To redeem a property, the homeowner must pay off the mortgage and all interest and late fees, court and attorney fees, title and appraisal fees, taxes and insurance. Otherwise, they will be evicted from the home.